Profit Margin Calculator
Calculates gross, operating, and net profit margins as a percentage of revenue from cost and selling price inputs
Rent, salaries, utilities, etc.
Taxes, interest, depreciation, etc.
Revenue minus cost of goods sold
Gross profit minus operating expenses
Operating profit minus taxes, interest, and other expenses
Frequently Asked Questions
What is profit margin?
Profit margin is the percentage of revenue that remains after subtracting costs. It measures how much of every dollar in sales a business keeps as profit. A higher margin means the business is more efficient at converting revenue into profit.
What is the difference between gross margin and net margin?
Gross margin only accounts for the direct cost of producing goods or services (COGS). Net margin subtracts all expenses including operating costs, taxes, interest, and depreciation. Gross margin shows production efficiency while net margin shows overall profitability.
What is a good profit margin for a small business?
It varies by industry, but a net profit margin of 10% is generally considered average, 20% is good, and 5% or below is low. Service businesses often have higher margins (15-30%) than retail or manufacturing (2-10%) because they have lower cost of goods sold.
How is profit margin different from markup?
Profit margin is calculated as a percentage of the selling price (profit / revenue). Markup is calculated as a percentage of the cost (profit / cost). A product that costs $60 and sells for $100 has a 40% margin but a 66.7% markup.
Why is my gross margin positive but my net margin negative?
This means your product or service is priced above its direct production cost, but your total operating expenses, taxes, and other costs exceed your gross profit. You may need to increase prices, reduce overhead, or grow sales volume to achieve a positive net margin.
Related Calculators
Markup Calculator
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Margin Vs. Markup Converter
Converts between margin percentage and markup percentage so users understand the difference
Break-Even Calculator
Calculates the exact number of units or revenue needed to cover all fixed and variable costs